Client Segmentation

Segmenting your client base can be a useful tool to help define the services you’ll provide and the communications you’ll undertake with your clients.

Some advisors may be concerned that segmenting your clients means you will be providing lower levels of service to some clients, but the intent is quite the opposite. Unless you provide levels of service for clients consistent with the fees or income you generate, it means your business would be over-charging some clients to pay for the service to others.

Here’s one example of a method of doing market segmentation. Feel free to use as is or modify to suit your situation.

Scoring methodology – The first step is to develop a scoring method using criteria that can be applied consistently across all your clients. The scoring can then be tallied to identify each client’s segmentation group.

Transactional business profile – What existing assets does you client have in place with you at the present time:

Points

Invested Assets

40

Greater than $2 million

35

Greater than $1 million

20

Greater than $500K

12

Greater than $250K

4

Greater than $100K

2

Less then $100K

Points

Insurance

20

Three products

16

Two products

10

One product

0

No product

Time commitment – The amount of time spent servicing the client, including time to market to them and time spent one on one. How well do they grasp concepts and understand where you are going with their plan, how well prepared for meetings are they?

Points

Time Commitment

10

Minimal time commitment (easy to serve)

5

Appropriate time commitment (given their situation)

0

Too much time (have to spend more time than should be necessary)

Potential – What is the potential for this client converting to fee-based service or gathering more assets and/or insurance business, etc.?

Points

Potential

10

Significant

5

Some

0

None

Referrals – How many referrals has the client provided to you so far and/or how many do you feel they may provide in the future.

Points

Referrals

10

Many

5

Some

0

None

Client compatibility – How comfortable are you with this client and how agreeable are they when it comes to implementation of your advice and recommendations.

Points

Client Compatibility

10

Great client

5

Acceptable

0

Disagreeable

Client segmentation based on scoring – Using the factors identified above, tally your client’s score and identify their segmentation category.

Points

Segmentation Category

80 - 100

“A” client

60 – 79

“B” client

40 – 59

“C” client

20 – 39

“D” client

<20

“E” client

Communications based on segmentation - Once you have identified each segmentation categories for all of your clients, you then have to define the communications and other activities that will be delivered. Here’s an example of some typical activities that can be built into your communication schedule:

Marketing and “Client Touch” Activities

Description

“A” Client

“B” Client

“C” Client

“D” Client

“E” Client

Christmas card

Y

Y

N

N

N

E-newsletter

4

4

4

4

4

Volatile market phone call

Y

Y

N

N

N

Birthday card

Y

Y

N

N

N

Client appreciation event

1

1

N

N

N

How are you? call

1

1

N

N

N

Business development workshop

2

1

1

1

N

Services and Activities

Description

“A” Client

“B” Client

“C” Client

“D” Client

“E” Client

Plan review

Y

Y

By request

By request

By request

Portfolio review

2

1

1

By mail only

By mail only

Quality assurance survey

Y

Y

Y

N

N

Obviously, managing each of these activities for a significant client base requires a well organized practice that has in place some type of CRM (client relationship management) system. Such systems often have automation features that let you schedule, track, and implement these various activities. Also, the actual frequency of events will be driven by your engagement agreement, particularly in cases where the client is fee-based and has contracted for a certain level of service.

Communication and “client touch”

When you combine face-to-face meetings, phone calls, mailing pieces, and client events like workshops and appreciation dinners, you end up with many client “touches” throughout the year.

Using these various methods means that it’s not necessary that you personally do everything. Many of these activities can be initiated and managed by an assistant. However, the client’s perception will be that they have a relationship with you, their advisor, which is strong due to excellent communication and regular contact.